Conservative Commentary Since 2012

Trump Set to Tame China’s Aluminum Dragon

While mainstream media has chased rabbits this past year reporting on Russian election interference and Hollywood sex scandals, President Trump is making good on his promise to Americans that he will level the playing field in order to make America competitive again in global manufacturing.

No one believes that manufacturing alone is the answer to America’s joblessness, but it is vital to our national defense and our economic well being—and Trump has just shy of 90 days to make a decision on taming China’s aluminum dragon and protecting a U.S. industry that is vital to our national security.

Despite the fact that we are in an information age, Americans need and should be producing the bulk of its own steel and aluminum. Enter Section 232, a national security investigation Trump launched in April 2017 that would impose a relief program that promotes primary aluminum production in the United States.

The Secretary of Commerce initiated the investigation under section 232(b)(1)(A) of the Trade Expansion Act of 1962 to determine the effects of aluminum imports on national security.

The Section 232 investigation allows the president to “adjust imports” that threaten to undermine U.S. national security. Since 2003, the U.S. primary aluminum industry has lost nearly 75 percent of its aluminum production capacity to China, costing more than 8,000 production workers their jobs.

Without a significant change, the U.S. will be fully dependent on foreign sources of aluminum and materials that are critical to arming our military and building and maintaining crucial infrastructure.

Trump met with members of Congress and officials from the aluminum industry in April. Photo credit: Stephen Crowley/The New York Times.

On January 10, 2018 Century Aluminum CEO Mike Bless and United Steelworkers Union (USW) Vice President Tom Conway joined with Speaker of the House Newt Gingrich, Rep. James Comer (KY) and General John Adams at the National Press Club in Washington, DC to encourage President Trump to take the next step in the aluminum Section 232 national security investigation by imposing broad comprehensive measures to promote primary aluminum production in the United States and enforce U.S. trade laws.

“Century is the only remaining U.S. producer of high purity aluminum, which is used in defense platforms including our F-35, F-18 and F-16 fighter jets and other equipment,” said Century Aluminum CEO Mike Bless.

“This could be our best, and last, opportunity to make sure this industry is here tomorrow for our men and women in uniform and for the communities that depend on the good jobs that the industry supports.”

Cheap aluminum from China threatens national security. This U.S. Navy variant of the F-35 Joint Strike Fighter, the F-35C, conducts a test flight over the Chesapeake Bay in 2011. (Photo credit: U.S. Navy courtesy Lockheed Martin via Getty Images.)

While China’s state-subsidization has been a primary driver of the problem, the aluminum crisis is a global issue. From 2013-2017, global production expanded significantly, due to government support for state owned enterprises (SOEs) and state-directed enterprises.

This expansion has driven a collapse in global prices, forcing U.S. producers to shut or idle their facilities in areas that desperately need jobs, such as Mt. Holly, South Carolina and the towns of Robards and Hawesville in Kentucky.

“President Trump promised to stand up to governments that don’t play by the rules and bring back U.S. jobs,” said USW’s Vice President Tom Conway.

“USW members across the country want President Trump to do the right thing for our nation’s security and critical infrastructure and for thousands of American aluminum workers and their families.”

Both Century and USW are encouraging the Trump administration to levy broad comprehensive tariffs to address systematic global overcapacity. This is not only the best way to safeguard U.S. national security, it is also the best way to motivate action towards the long-term goal of bringing the global market back into balance and long-term sustainability.

According to the Aluminum Association, the domestic aluminum industry is growing–creating American jobs and committing or investing more than $2 billion since 2013 to expand U.S. manufacturing. But subsidized production in China, which is leading to unfair and illegal trade practices, threatens the industry’s continued health.

And yet much of this future growth potential is threatened for one key reason–the persistent and dramatic overcapacity of aluminum in China, which is distorting the market and hurting the entire value chain.

Over the past decade, Chinese aluminum production has grown at an alarming rate. In 2000, China produced about 11 percent of the world’s primary aluminum. Today, it produces more than half. For many years, China absorbed nearly all of this metal domestically but as the economy softened and demand declined, producers did not respond to market signals. The Association recommended an action plan that includes:

Ending Subsidies and Other Market-Distorting Behavior: The industry in China today is heavily subsidized. For example, the Commerce Department identified 26 separate Chinese government subsidy programs in the foil market as part of the association’s AD/CVD case.

Enforcing U.S. Trade Laws: Ensure that global trade rules and laws are applied and enforced.

Cracking Down on Misclassification and Transshipment: There’s growing evidence that some Chinese producers are deliberately misclassifying aluminum or shipping the metal through third-party countries to avoid relevant trade duties, unconstrained by government enforcement. This illegal behavior distorts the market and violates Chinese and U.S. law.

Maintaining Non-Market Economy Status for China: The aluminum industry, along with the steel, textile, chemical and other industries have formed a coalition–Manufacturers for Trade Enforcement–opposing China’s call for treatment as a market economy under WTO rules. China has not proven that it operates as a market economy. Granting market economy status prematurely would remove a key tool for industries seeking government relief from unfair trade practices.

Increasing Market Transparency: China should disclose information about state-owned enterprises (SOEs) operating in the aluminum industry.The International Trade Commission’s report confirmed that oversupply is harming global aluminum producers and that China’s capacity growth supplying the world market has far exceeded all other countries.

On January 22, 2018, Secretary of Commerce Wilbur Ross formally submitted to President Trump the results of the Department’s investigation into aluminum imports on U.S. national security. President Trump now has less than 90 days to decide on any potential action. Let’s make America great again Mr. President and open the door for both investors and manufacturing to once again thrive in the United States.